Traut v. AND Agency, LLC et al

Filing 33

MEMORANDUM Opinion and Order: Defendants' ANDx, Kamieniak, and Tait's motion to dismiss 16 is denied in part and granted in part. Counts I, II, III (IWPCA claims) may proceed against all Defendants. ANDx and Kamieniak are dismissed from Counts VII and VIII (fraud) with prejudice. Defendant Ho's motion to dismiss 26 is denied. Count IV (IWPCA claim) may proceed. All Defendants to answer the complaint by April 24, 2024. Signed by the Honorable Mary M. Rowland on 3/27/2024. (See attached Order for further detail.) Mailed notice. (dm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DAVID U. TRAUT,
Plaintiff,

Case No. 23-cv-03882

v.

Judge Mary M. Rowland

AND Agency, LLC and others,
Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff David Traut brings this suit against Defendants AND Agency LLC
d/b/a ANDx (“ANDx”), Adam Kamieniak, Darren Tait, Johann Ho, and Karen Bell,
individually for various state law claims, including breach of the Illinois Wage
Payment and Collection Act, 820 ILCS 115/1 (Counts I-V against all Defendants),
breach of contract (Count VI against ANDx), and common law fraud (Counts VIICounts VIII against ANDx and Kamieniak). 1 [1]. For the reasons stated herein,
Defendants ANDx, Kamieniak, and Tait’s motion to dismiss [16] is granted in part
and denied in part. Defendant Ho’s motion to dismiss [26] is denied. Defendants’
answer to the complaint is due by April 24, 2024.
I.

Background
The following factual allegations are taken from the Complaint [1-1] and are

accepted as true for the purposes of the motion to dismiss. See W. Bend Mut. Ins. Co.
v. Schumacher, 844 F.3d 670, 675 (7th Cir. 2016).
1

It appears that Karen Bell has not yet been served summons.

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Plaintiff David U. Traut (“Traut”), a citizen of Wisconsin, began working for
Defendant ANDx as a Senior Vice President of Technology Sales on or about June 15,
2021. Id. ¶ 1. At all relevant times, ANDx maintained its headquarters and principal
place of business at 1100 E. Woodfield Rd., Schaumburg, Illinois 60173. Defendant
ANDx was a limited liability company organized and existing under the laws of the
state of Illinois, beginning in 2009 when it was founded until December 28, 2020. Id.
¶ 2. Id. On December 28, 2020, the company reincorporated in the state of Florida for
asset protection purposes as it faced diminishing revenue and financial uncertainty.
Id.
Defendant Adam T. Kamieniak (“Kamieniak”) was an Illinois citizen, residing in
St. Charles, Illinois, and the company’s President and Chief Executive Officer. Id. ¶
3. He also owns a 70% membership interest in ANDx and is a key decision maker
responsible for determining company policy, terms, and working conditions. Id.
Defendant Darren R. Tait is an Illinois citizen, residing in Chicago and Pinegree
Grove, Illinois, and served as Chief Operating Officer. Id. ¶ 4. Tait owns a 30%
membership interest. Id. Defendant Joann Ho was a Canadian citizen residing in
Toronto, Canada, and ANDx’s Chief Financial Officer. Id. ¶ 5. Ho also provided Traut
with investment information about, and access to, the subject Annuity upon his
termination of employment by ANDx. Id. Defendant Karen Bell (“Bell”) was a
Canadian citizen, residing in Toronto, Canada, and was the Company’s Chief Human
Resources Officer. Id. ¶ 6. Kamieniak, Tait, Ho, and Bell all served on the company’s
board of directors. Id. ¶¶ 3-5. Each individual Defendant played key decision-making

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roles in the company, along the lines of Kamieniak’s employment-related duties. Id.
¶¶ 4-6.
On April 14, 2021, Traut entered into a written Employment Agreement
governing the terms and conditions of his employment with ANDx as Senior Vice
President of Technology, Sales. Id. ¶ 9. The Agreement entitled Traut to various
streams of compensation for his employment, including an annuity to be funded by
ANDx in the sum of $522,828.48. Id. ¶ 10. Under the Employment Agreement, Traut
was immediately vested in the Annuity as of June 15, 2021, when his employment
began, as consideration for his willingness to (1) accept employment with ANDx,
leaving AT&T, his former employer of 18 years, and (2) forego receiving compensation
at AT&T similar to the principal value of the Annuity. Id. ¶ 11. The Employment
Agreement required ANDx to fully fund Traut’s annuity by March 31, 2023,
regardless of his employment status or job performance. Id. ¶ 12. 2
From June 15, 2021, to November 15, 2022, the period of Traut’s employment
with ANDx, he regularly attended in-person business meetings in Illinois. Id. ¶ 13.
At all relevant times, the company-maintained space at its Schaumburg, Illinois
facility for Traut to conduct business if needed. Id. ¶ 14. Traut serviced and met with
ANDx customers in Illinois and solicited prospective Illinois customers as well. Id. ¶
15. Traut also supervised various ANDx employees who resided and worked in Illinois

The Agreement reads as follows: VESTING PROVISIONS: The Plan will vest in full on your
employment start date with the Company. TERMINATION OF THE PLAN: On March 31, 2023, if
the Participant has not died prior to this date, the Plan will have $522,828.48 deposited into a
Company account [ ] separated from its operating funds . . . [1-1] ¶ 12.
2

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and received a paycheck from ANDx’s Illinois bank account. Id. ¶ 16. Traut’s actions
were performed in the ordinary course of his employment with ANDx. Id. ¶ 17.
On November 15, 2022, the company terminated Traut’s employment without
cause. Id. ¶ 18. Traut’s termination letter was signed by Kamieniak, and states, “In
addition, your annuity agreement with the Company survives the termination of your
employment. Please contact Johann Ho, CFO before March 31, 2023, to discuss the
agreement and determine the investment strategy for those funds.” Id. ¶ 19. After
his termination, Traut attempted to communicate with ANDx and Ho regarding his
Annuity. Id. ¶ 20. Despite his efforts, Ho and ANDx failed and refused to have any
substantive communications with Traut regarding his Annuity or if/how his Annuity
funds would be invested by ANDx on his behalf, or by him personally. Id. ¶ 21.
Traud alleges that despite his demands, Ho and ANDx have (1) failed and refused
to fund the Annuity; (2) failed to properly separate its funds from its operating funds
as promised and required; (3) failed to allow Traut to specify the investment strategy
for the Annuity; and (4) failed to provide the Annity to Traut as required by the
Employment Agreement, and in consideration for his joining and performing work at
ANDx. Id. ¶ 22.
On May 1, 2023, Traut filed suit in state court. [1-1]. Defendants timely
removed this action to federal court on June 20, 2023. [1] (Notice of Removal). The
complaint alleges breach of the Illinois Wage Payment and Collection Act, 820 ILCS
115/1 (Counts I-V against all Defendants), breach of contract (Count VI against
ANDx), and common law fraud (Counts VII-Counts VIII against ANDx and

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Kamieniak). Traut seeks compensatory and punitive damages for the alleged
misconduct. Before the Court is Defendants’ motions to dismiss Traut’s complaint for
lack of personal jurisdiction, failure to state a claim, and failure to meet heightened
pleading standard for fraud claims under FRCP 9(b). See [16]; [26].
II.

Standard
A motion to dismiss under Rule 12(b)(2) challenges the Court’s jurisdiction over

it. The party asserting jurisdiction has the burden of proof. See Tamburo v. Dworkin,
601 F.3d 693, 700 (7th Cir. 2010)). The plaintiff bears the burden of establishing
personal jurisdiction, but where the issue is raised on a motion to dismiss, “the
plaintiff need only make prima facie showing of jurisdictional facts.” Purdue Research
Found v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003). To determine
whether the plaintiff has met his burden, the Court may consider affidavits from both
parties. Felland v. Clifton, 682 F.3d 665, 672 (7th Cir. 2012). The Court will read the
complaint liberally and draw every reasonable inference in favor of the plaintiff.
Central States, Se. & SW Areas Pension Fund v. Phencorp Reinsurance Co., 440 F.3d
879, 878 (7th Cir. 2006) (internal citation omitted). Once the defendant has submitted
evidence in opposition to the Court’s exercise of jurisdiction, the “plaintiff must go
beyond the pleadings and submit affirmative evidence supporting the exercise of
jurisdiction.” Purdue, 338 F.3d at 783. Any dispute concerning relevant facts is
resolved in favor of the plaintiff. Id. at 782-83.
A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint,
not the merits of the case. Gibson v. City of Chi., 910 F.2d 1510, 1520 (7th Cir. 1990).

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“To survive a motion to dismiss under Rule 12(b)(6), the complaint must provide
enough factual information to state a claim to relief that is plausible on its face and
raise a right to relief above the speculative level.” Haywood v. Massage Envy
Franchising, LLC, 887 F.3d 329, 333 (7th Cir. 2018) (quotations and citation omitted).
See also Fed. R. Civ. P. 8(a)(2) (requiring a complaint to contain a “short and plain
statement of the claim showing that the pleader is entitled to relief.”). A court
deciding a Rule 12(b)(6) motion accepts plaintiff’s well-pleaded factual allegations as
true and draws all permissible inferences in plaintiff’s favor. Fortres Grand Corp. v.
Warner Bros. Entm't Inc., 763 F.3d 696, 700 (7th Cir. 2014). A plaintiff need not plead
“detailed factual allegations”, but “still must provide more than mere labels and
conclusions or a formulaic recitation of the elements of a cause of action for her
complaint to be considered adequate under Federal Rule of Civil Procedure 8.” Bell v.
City of Chi., 835 F.3d 736, 738 (7th Cir. 2016) (citation and internal quotation marks
omitted).
Dismissal for failure to state a claim is proper “when the allegations in a
complaint, however true, could not raise a claim of entitlement to relief.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 558, 127 S. Ct. 1955, 1966 (2007). Deciding the
plausibility of the claim is “‘a context-specific task that requires the reviewing court
to draw on its judicial experience and common sense.’” McCauley v. City of Chi., 671
F.3d 611, 616 (7th Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S. Ct.
1937, 1950 (2009)).

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Rule 9(b) requires a party alleging fraud to “state with particularity the
circumstances constituting fraud.” Fed. R. Civ. P. 9(b); see also Borsellino v. Goldman
Sachs Crp., Inc., 477 F.3d 502, 507 (7th Cir. 2007). This ordinarily requires describing
“the who, what, when, where, and how: the first paragraph of any newspaper story.”
DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990).
III.

Analysis
A. The Court may exercise General Jurisdiction over Defendants

ANDx and Ho.
Defendants ANDx and Ho first argue that the Court does not have personal
jurisdiction, as ANDx is now incorporated in the state of Florida and Ho is a Canadian
citizen. 3 [17] at 5-9; [27] at 3-8. The Court disagrees.
A district court sitting in diversity has personal jurisdiction over a defendant
only if the state court in which it sits would have jurisdiction. Purdue, 388 F.3d at
779. In Illinois, general personal jurisdiction exists when defendants are citizens of
the state, or the causes of action at issue in the case arise out of defendants’ contacts
with the state. 735 ILCS 5/2-109(a)(1), (b)(1)-(4). It is well established that those
contacts with the forum state must be “continuous and systematic” in nature.
Tamburo, 601 F.3d at 701.
Here, according to the complaint, ANDx was originally incorporated in Illinois
and had its principal place of business in Schaumburg, Illinois. Traut has submitted
an affidavit with accompanying exhibits to provide affirmative evidence of personal

3

As Illinois residents, Kamieniak and Tait do not dispute this Court’s jurisdiction over them.

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jurisdiction. In the affidavit, Traut asserted that his duties included building a
division of the company, located in Illinois, to sell technology solutions in-state. [211] at 2. Traut received business cards to give ANDx customers, prospective customers,
contractors, agents, and suppliers with the company’s Schaumburg, Illinois office
address on it. Id. at 3. Traut was also told to use the Schaumburg office for meetings
with customers and any other meetings necessary for his job duties. Id. Further,
Traut’s ANDx profile on the Employee Resources System for ANDx showed that he
was an employee in its “Chicago” location. Id. at 16.
During his employment with ANDx, Traut had face-to-face meetings with
customers and prospective customers in Illinois approximately forty-seven times. Id.
at 6-14; [21] at 2. Traut stated that he spent dozens of hours in Illinois in furtherance
of his employment duties, and supervised employees who resided in Illinois. [21-1] at
14-15. ANDx also paid Traut through a bi-weekly paycheck from an Illinois bank
account, and Traut filed his tax documents showing the ANDx’s address located at
the Schaumburg, Illinois office. Id. at 15. In fact, ANDx conceded in a supplemental
filing that it maintained its original office in Schaumburg, Illinois, even after it reincorporated in Florida. See [29] at 2. (“[D]efendants wish to retract and clarify that
ANDx did not shut down the Schaumburg office or terminate the lease for this
office.”). As ANDx had a Schaumburg, Illinois office and continuous contacts in the
state of Illinois, this Court has personal jurisdiction over ANDx.
The Court also has personal jurisdiction over Defendant Ho. Traut states that
Ho gave him direction on virtually all financial and legal matters for ANDx on dozens

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of occasions. [30-1] at 2. These communications included multiple emails per week,
telephone, and Microsoft Teams meetings. Id. at 3. During many of these
communications, Traut was physically present in the state of Illinois. Id. Ho directed
Traut on how to build the new division in Illinois in the “Great Lakes area”, directing
financing and payments of ANDx business operations through its Illinois financial
institutions. Id. Ho also helped establish sales and master agent relationships with
companies and individuals headquartered in Illinois. Id. Further, Ho managed
financial and legal staff, contractors, and contracts, payment procedures, and related
documents for ANDx, some of which were in Illinois. Id. Ho also led ANDx clients,
prospective clients, and suppliers to believe that ANDx’s main operating location was
at the Schaumburg, Illinois office. Id. at 4. Finally, Traut states that customer
invoices and wire transfers, (which the Court reasonably infers that Ho managed as
part of his duties), were to be made to the Schaumburg, Illinois address, and a bank
located in Elk Grove Village, Illinois respectively. Id.
Ho argues that sporadic or sparse communications do not afford courts with
general jurisdiction over a person. See Costa v. Ramiaiah, 2023 WL 5581261 (N. D
Ill. Aug. 29, 2023); Sullivan v. Bickler, 360 F.Supp. 3d 778, 784 (N.D. Ill. 2019). That
is not what Traut has alleged. Rather, Traut alleges that Ho directly supervised him
and communicated with him while Traut was located primarily in Illinois, directed
business operations through Illinois financial institutions, and led third parties to
believe that the Schaumburg, Illinois office was the main operating location. Ho also
had numerous and substantial contact with Illinois because of his general

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employment duties, not solely because of his contacts with Traut. Other cases cited
by Ho are therefore likewise unpersuasive. 4
The Court maintains personal jurisdiction over all Defendants.
B. Traut can avail himself of IWPCA protections.
The Court next turns to the Illinois Wage Payment and Collection Act
(“IWPCA”) claims at issue (Counts I-IV). Defendants argue the IWPCA claims fail as
a matter of law because Traut is a Wisconsin resident and has not performed
sufficient work in Illinois to avail himself of the statute. [17] at 10-12; [27] at 8-12.
The Court disagrees.
To state a claim under the IWPCA, a plaintiff must show that: (1) he had an
employment agreement with the employer that required wage payments or financial
compensation; and (2) that the defendants were considered employers under the
IWPCA. See Landers-Scelfo v. Corporate Office Systems, Inc., 827 N.E.2d 1051, 1067
(Ill. App. Ct. 2005). The Act applies to all employees and employers in the state,
including an employee who resides in another state but performed work for an Illinois
employer. Adams v. Catrambone, 359 F.3d 858, 863 (7th Cir. 2004). The Act’s purpose
is to “protect employees in Illinois from being stiffed by their employers.” Glass v.
Kemper Corp., 133 F.3d 999, 1000 (7th Cir. 1998). However, the Act does not have an
“extra-territorial reach”. Id.
Here, as explained supra, Traut worked for ANDx, which had an office location
in Illinois held out by senior members of the company as its headquarters during his
Adv. Tactical Ordinance Sys., LLC b. Real Action Paintball, Inc., 751 F.3d 796, 801 (7th Cir.
20140); Helicopters Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (1984)
4

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period of employment. ANDx is an Illinois-based employer, maintaining a “Chicago
location” in Schaumburg, Illinois, utilizing Illinois financial institutions, operating
an Illinois division seeking to work with Illinois customers, and employing Illinois
residents. The IWPCA thus applies to ANDx. Traut also performed a substantial
amount of work in Illinois. See Adams, 359 F.3d at 865 (finding the Act applied to a
Michigan resident who had performed work in Illinois); see also McGreal v. Semka,
836 F. Supp. 2d 735, 740 (N.D. Ill. 2011) (allowing an IWPCA claim to go forward
where the employer maintained an Illinois office, marketed its services in Illinois,
and conducted substantial business in the state).
Defendants cite Glass to support their argument that the IWPCA does not have
an extra-territorial reach, but Glass is distinguishable for two reasons. In Glass, (1)
even though the employer’s principal place of business was in Illinois, the nonresident employee was in Spain, not in the United States; and (2) the plaintiff did not
perform any work in Illinois—all of his duties were performed abroad. Id. at 1000.
Here, to the contrary, Traut is undoubtedly domiciled in the U.S. and substantially
worked in Illinois. Indeed, Traut performed most of his duties in Illinois, working
with Illinois customers and supervising Illinois based employees. The other cases
cited fail for the same reason.
The Act also provides that “any officers of a corporation or agents of an
employer who knowingly permit such employer to violate the provisions of this Act
shall be deemed to be the employers of the employees of the corporation.” 820 ILCS
115/13. Thus, liability under that Act “can be imposed upon . . . any officers of a

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corporation or agents of an employer who knowingly permitted the Wage Act
violation.” McGreal, 836 F. Supp. 2d at 741 (citing Andrews v. Kowa Printing Corp.,
838 N.E.2d 894 901 (Ill. App. Ct. 2001)). Traut has alleged sufficient facts in his
complaint to hold Kamieniak, Tait and Ho, individually, liable under the IWPCA at
this stage.
The IWPCA claims may therefore proceed.
C. The fraud claims are dismissed.
Defendants ANDx and Kamieniak finally argue that Traut’s fraud claims fail
under the heightened 9(b) pleading standard, that he cannot recover in tort (under
the IWPCA) for what is essentially a breach of contract, and that Kamieniak cannot
be personally liable for fraud. [17] at 12-15. Traut argues that he states a valid claim
for a scheme to defraud against both Defendants. [21] at 11-14.
Under Fed. R. Civ. Pro. 9(b), plaintiffs must plead the circumstances
constituting fraud with particularity: the who, what, where, why and how. See
Borsellino, 477 F.3d at 507 (internal citations omitted). “To state a fraud claim under
Illinois law, a plaintiff must allege that the defendant: (i) made a false statement of
material fact, (ii) knew or believed the statement to be false; (iii) intended to and, in
fact, did induce the plaintiff to reasonably rely and act on the statement; and (iv)
caused injury to the plaintiff.” Reger Development, LLC v. National City Bank, 592
F.3d 759, 766 (7th Cir. 2010) (citing Redarowicz v. Ohlendorf, 441 N.E.2d 324, 382 (Ill.

12

App. Ct. 1982)). Traut argues he has satisfied this requirement, but his claim faces a
bigger hurdle: he has waived the issue. 5
Defendants argue that Traut’s fraud claims are duplicative of his breach of
contract and IWPCA claims. [17] at 13. Defendants’ unrebutted argument is correct.
Because Traut’s IWPCA claims survive, his fraud claim does not. See Bruger v. Olero,
Inc., 434 F. Supp. 3d 647, 657 (N.D. Ill. 2020) (dismissing plaintiffs’ fraud claims
which had the same allegations underlying their IWPCA because “a party may not
recover in tort for a claim, like an IWPCA claim, that sounds in breach of contract.”)
(citing Tsybikov v. Doval, 2019 WL 5208869, at *3 (N.D. Ill. Oct. 16, 2019)). Traut
also fails to address Defendants’ argument that there is no basis to hold Kamieniak
personally liable for fraud, nor provides a reason for the Court to pierce the veil and
allow the claim to proceed. Id. at 14-15. Traut has thus forfeited his fraud claims.
IV.

Conclusion
For the stated reasons, Defendants’ ANDx, Kamieniak, and Tait’s motion to

dismiss [16] is denied in part and granted in part. Counts I, II, III (IWPCA claims)
may proceed against all Defendants. ANDx and Kamieniak are dismissed from
Counts VII and VIII (fraud) with prejudice. Defendant Ho’s motion to dismiss [26] is
denied. Count IV (IWPCA claim) may proceed. All Defendants to answer the
complaint by April 24, 2024.

See Boogard v. Nat’l Hockey League, 891 F.3d 289, 295 (7th Cir. 2018) (“[A] district court may hold
a claim forfeited if a plaintiff fails to respond to the substance of the defendant’s motion to dismiss”);
see also Bonte v. U.S. Banks, N.A., 624 F.3d 461, 466 (7th Cir. 2010) (“[f]ailure to respond to an
argument … results in waiver.”).

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E N T E R:
Dated: March 27, 2024
MARY M. ROWLAND
United States District Judge

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